Metro How U.S. Metropolitan Areas Fuel American Prosperity MetroNation How U.S. Metropolitan Areas Fuel American Prosperity THE BROOKINGS INSTITUTION | METROPOLITAN POLICY PROGRAM © 2007 CONTENTS Executive Summary ................................................................4 I. Introduction............................................................................8 II. Emerging Challenges to U.S. Prosperity ...................10 1. The U.S. economic powerhouse faces expanded global competition........................................11 2. Our domestic economy continues to restructure ..................................................................14 3. Labor market changes have fueled economic polarization...................................................16 4. Major U.S. demographic shifts portend new economic challenges ............................18 5. Global growth and domestic consumption have exacerbated natural resource pressures.......20 III. Metropolitan Areas: Engines of American Prosperity........................................................22 1. True prosperity requires productive, inclusive, and sustainable growth................................................23 2. Investments in innovation, human capital, and infrastructure help drive American prosperity ........................................................................25 3. America’s metropolitan areas aggregate its key drivers of prosperity........................................30 4. Major metro areas strengthen key prosperity drivers..........................................................36 IV. Promoting Metropolitan Prosperity: The Case for a Renewed Federal Approach...................46 1. Despite their collective potency, U.S. metros as a group are underperforming on key measures of productive, inclusive, and sustainable growth .......................................................48 2. Outmoded federal policies inhibit metropolitan adaptation to fast-changing realities........................53 3. Our nation needs a Blueprint for American Prosperity........................................................................55 V. Conclusion ...........................................................................56 Appendix ....................................................................................57 Endnotes...................................................................................60 2 BROOKINGS METROPOLITAN POLICY PROGRAM The effort to secure American prosperity in the 21st century confronts a series of new realities. BLUEPRINT FOR AMERICAN PROSPERITY: METRONATION 3 EXECUTIVE SUMMARY The stakes are high as the United States approaches the 2008 Presidential election. Often unsettling forces are rapidly transforming the world in which we live and the rules that govern how our families and communities thrive. These forces pose a series of historic challenges and opportunities for the nation: å How does the American economy maintain its edge in the face of quickening competition abroad, and con- tinued restructuring at home? å How can we grow the education and skills of our workers, and secure more broadly shared gains from economic growth? å How will our nation combat the threat from global cli- mate change and achieve greater energy independ- ence, given continued U.S. population growth? In short, the effort to secure American prosperity in the 21st century confronts a series of new realities. These new realities, in turn, demand a reality check about who we are as a nation, and how we will succeed in the future. The United States is not the nation of gentleman farm- ers in which our founding fathers lived. Nor is it defined by the teeming, polluted, industrial cities of a century ago. Today, our nation—and our economy—is metropolitan. U.S. metropolitan areas—complex regions of interwoven cities and suburbs—are home to more Today, our nation—and our economy—is metropolitan. than eight in ten Americans and jobs. These metros range from global eco- nomic centers like New York, Chicago, and San Francisco; to major trade hubs like Louisville, Houston, and Seattle; to smaller, highly produc- tive centers like Bridgeport, Durham, and Des Moines. They concentrate and strengthen the assets that drive our economic productivity, grow the skills and incomes of our workers, and contribute to our environmental sustainabil- ity. Our major metro areas reflect the face of America in a global economy where, for the first time, more than half the world’s population is metropolitan. 4 BROOKINGS METROPOLITAN POLICY PROGRAM This report argues that the ability of our nation to meet the great economic, social, and environmental imperatives of our time thus rests largely on the health and vitality of our metropolitan areas. Yet U.S. metropolitan areas, for all their economic might, face a series of troubling challenges that hold back our nation’s prosperity. And as local and regional leaders across the nation struggle to surmount these challenges, they confront a legacy federal government maladapted to dynamic metropolitan realities. Along these lines, MetroNation draws the following conclusions: 1. New challenges to American prosperity have emerged. Profound changes in the global and domestic economy present America with a series of historic chal- lenges: å The U.S. economic powerhouse faces expanded global competition. Economic liberalization through- out the world, skills upgrades in developing countries and massive technological advances mean that the United States faces expanded competition for jobs and investment. China and India alone accounted for more than 40 percent of global economic growth from 2000 to 2005. å Our domestic economy contin- The ability of our nation to meet the great economic, ues to restructure. The share of U.S. jobs in manufacturing social, and environmental imperatives of our time has fallen from 31 percent to 10 percent over the past half rests largely on the health and vitality of our metro- century. Meanwhile, services employment has risen to politan areas. two-thirds of all U.S. jobs. Accelerated “offshoring” in both sectors threatens to bring about economic disloca- tion for American workers and firms in the future. å The U.S. labor market has become more economi- cally polarized. Wages for highly educated workers have risen considerably over the past 30 years, while those for less educated workers have stagnated or fallen. In part due to this polarization, the typical American family has not benefited from recent economic growth to the same degree as in previous generations. å Demographic shifts portend new economic chal- lenges. An aging workforce, combined with projected population increases among historically less edu- cated groups, will test the nation’s ability to sustain its economic leadership, achieve rising standards of living for all, and provide for a growing retired popu- lation in the future. BLUEPRINT FOR AMERICAN PROSPERITY: METRONATION 5 Investment in innovation, human capital, and infrastructure helps drive American prosperity Prosperity outcomes and drivers, and common measures of each å Global growth and domestic consumption have exacerbated natural resource pressures. These trends have raised the price of energy and increased the threat to low-lying coastal areas and sensitive ecosystems from global climate change. With the United States set to add another 120 million people by True prosperity requires productive, inclusive, and 2050, such resource pressures are likely to intensify. sustainable growth. 2. America’s metropolitan areas are the engines of national prosperity. In a global economy marked by a highly competitive, interlinked network of major city- regions, America’s efforts to extend prosperity depend more than ever on the success of its metropolitan areas: å True prosperity requires productive, inclusive, and sustainable growth. Our nation must aspire and act to maintain its economic leadership, foster a strong and diverse middle class, and advance efforts to address climate change and achieve energy inde- pendence. These three growth goals are not mutually exclusive, and can actually reinforce one another. å Investments in innovation, human capital, and infrastructure help drive American prosperity. Strategic public and private investments in these core assets—and in the quality places where they come together most forcefully—contribute crucially to productive, inclusive, and sustainable national growth. 6 BROOKINGS METROPOLITAN POLICY PROGRAM Major metros aggregate fundamental drivers of prosperity, and generate 75 percent of U.S. GDP Percentage of national activity in 100 largest metro areas, various indicators, 2005 n America’s metropolitan areas aggregate its key 3. To achieve American prosperity, we need a new fed- drivers of prosperity. The 100 largest U.S. metropol- eral partnership to promote metropolitan prosperity itan areas contain 65 percent of the nation’s popula- For all their aggregate strength, America’s metropolitan tion and 68 percent of its jobs, but gather even larger areas face a series of troubling challenges that hold back shares of innovative activity (78 percent of U.S. our collective prosperity. Their collective productivity patent activity), educated workers (75 percent of growth rate has begun to slip, their college degree-earning graduate degree holders), and critical infrastructure pace has slowed, and their sprawling development pat- (79 percent of U.S. air cargo). As such, they generate terns continue to fuel elevated greenhouse gas emissions.